Treasury Management: The Commissioner’s Wish List

December 16, 2010

CFTC Commissioner Scott O’Malia, a stickler and vocal critic within the rule-making process, wants a few things for the New Year.

Treas Management - Blackboard flowchartIt’s turning out that Chris Dodd and Barney Frank may have had the easy part. The two congressmen who gave their names to Dodd-Frank certainly struggled passing their bill. But it’s the rule writers who are struggling now.

The Commodities Futures Trading Commission (CFTC) is one of them. The agency is going from regulating a small-time $40tn futures market to a $300tn derivatives market and they have hundreds of rules to write to everyone’s satisfaction before July 2011. This would be difficult even in a perfect world where all the agency’s commissioners were in agreement. But they’re not.

Take Commissioner Scott O’Malia. During a recent series of “Proposed Rulemakings Under the Dodd-Frank Act,” he would open his remarks graciously thanking CFTC staff for all their hard work in writing whatever the proposal was presented that day, but then follow it up by declaring it mostly unsatisfactory because it was too rushed, too broad or too narrow. In his latest remarks Commissioner O’Malia considers all his protestations and comes up with a wish list for the New Year.

Here’s what he hopes to get in the New Year:

  • A more organized rulemaking process that will “build derivatives regulation from a strong foundation instead of the regulatory jumble.” To that end, Commissioner O’Malia wants clear definitions, trading platform criteria and governance. Better clearing development, capital and margin and business conduct standards and finally, position limits that are “based on actual data.”
  • Technology. The CFTC faces a “massive challenge” of moving all forms and filings to an electronic data collection system that takes away the possibility of human error from all the new reporting requirements. The CFTC needs to invest more capital in surveillance systems that can see across markets. To accomplish this, Commissioner O’Malia proposes an Office of Market Data Collection and Analysis led by a chief data officer who would develop and articulate a strategic vision for the mission-critical functions associated with data management. CFTC should have a budget “that doesn’t include laptops, Blackberry support and toner cartridges.”
  • Better communication with the public. The CFTC should organize a public education system that “responds to the influx of questions from the public and assist them in understanding the avenues for timely recourse to resolve disputes they may have with Commission registrants when they arise.” 
  • Help in resolving the federal budget deficit. Commissioner O’Malia noted that Congress gave the agency a “very generous budget” despite the difficult times. Therefore, it must do its part to find savings where it can.

Better organization, more clarity, more technology, better communication with the public and a “waste not, want not” attitude. If the commissioner can get even one of those goals, it will likely make someone happy. End users should be rooting for most.

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